Posted On April 3, 2019 By In Regulars With 177 Views

Common Cents – The Hazards of Adding a Child to the Title of Your Home

by Todd Wiebe, Salvador Davis & Co. –

When conducting an estate plan, many of my clients are asking how to make it as simple as possible. For many, this means exploring ways of avoiding probate, particularly when they have seen the work involved in obtaining probate.

One of the ways that we can ensure probate is not going to apply for an estate is to have joint owners on assets. This means that when you pass away the remaining person on the assets simply have to remove the deceased from the asset. This can mean a substantially reduced workload as compared to probate.

Regardless of the intention at the outset, the act of adding another person to an asset means that we are giving up some amount of control over our own assets – assets that we still need to maintain ourselves. 

A mistake that some people make is thinking that just because they bought it alone, or that the others on title don’t live there, that they are solely in control of the asset. Regardless of the initial intention, when we add another person to an account or the title of a home that means that this person will now have equal rights with you. Moreover, you would need their permission to sell or transfer the house.

The risk in adding another person is solely held by the original owner rather than the person we are adding. Their only concern could be capital gains, whereas this is your home and needs to be protected at all costs. 

When we own assets jointly with spouses, we accept the risk and trust that they will not compromise those assets. The dynamic is merely different when we add others, and we need to appreciate that we are now adding their liabilities to our own asset. If they are sued or go through a divorce, for instance, it is possible that those creditors could claim against that asset. 

When there are multiple children but we only add one of them, assuming that they will share with their siblings upon our death, we must appreciate that they may not do so and this can often lead to either disappointed beneficiaries or court challenges. 

For these reasons it is often preferable to keep the asset in your name alone and allow it to pass through your estate. Probate will be necessary but this method is much less likely to lead to issues and carries no risk for you, especially since the cost of probate is often much less than people assume.

Adding others onto title or other assets does have benefits, but it requires an appreciation of the risks and requires good advice.

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